The plunge in prices could actually turn out to be good news for buyers. According to Richard Redash, head of global gas planning at S&P Global Platts, cheaper gas prices “will boost coal-to-gas switching in the power sector and tighten U.S. balances, limiting supply available” to increase storage levels.

Natural gas prices posted a steep decline last week in a move that may have confused traders. Extremely hot temperatures nearly covered the entire United States, but buyers remained scarce and support eroded. Even the previous weekend’s passing of Hurricane Barry couldn’t give prices a boost as it led to lower demand.

The problem for bullish natural gas traders is the heat is moving too quickly to feed lingering periods of high demand. It seems that every hot spell is being followed by a quick return to normal temperatures. Until this pattern changes, any rally is likely to be fueled by short-covering rather than aggressive buying. And the major short-sellers are just waiting to add to their bearish positions on any rally.

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a slightly below-average 62 Bcf build into U.S. natural gas stocks during the week-ending July 12. This was on the low end of analyst forecasts.

Ahead of the EIA report, traders were looking for this week’s EIA weekly storage report to come in at about 72 Billion Cubic Feet (Bcf).

Last year, the EIA recorded a 46 Bcf injection for the period, which covers the week-ended July 12. The five-year average is a build of 63 Bcf.

As of July 12, Total Lower 48 working gas in underground storage stood at 2,533 Bcf, 291 Bcf (13.0%) above year-ago levels but 143 Bcf (minus 5.3%) below the five-year average, according to the EIA.

Short-Term Weather Outlook

According to NatGasWeather for July 22-28, “Weather systems with showers and cooling will arrive over the central, southern, and eastern US this week, easing highs into the 70s & 80s for much lighter national demand. Hot high pressure will shift over the West with highs of upper 80s to 100s, hottest over the Southwest into West Texas. Temperatures will warm across the southern US and Mid-Atlantic next weekend with highs of upper 80s to 90s gaining. Overall, national demand will rapidly drop from very high this past weekend to only moderate this week.”

Weekly Forecast

The plunge in prices could actually turn out to be good news for buyers. According to Richard Redash, head of global gas planning at S&P Global Platts, cheaper gas prices “will boost coal-to-gas switching in the power sector and tighten U.S. balances, limiting supply available” to increase storage levels.

According to Barron’s, “Platts Analytics argues that Henry Hub prices are ‘undervalued, relative to current Nymex futures,’ says Redash. ‘We think prices will pop back into the former $2.50 to $2.90 [million BTUs] range later this summer, with even greater upside risks awaiting in the winter.’”

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.

RISK DISCLAIMER

This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.